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The following journal entry is recorded in the books of RST Ltd. on issue of debentures :

Bank a/c Dr 18,00,000

Loss on issue of Debentures a/c Dr 6,00,000

To 14% Debentures 20,00,000

To Premium on Redemption of Debentunes 4,00,000

Debentures have been issued at a discount of :

Solution

✅ Correct Option: 2

Total Loss on Issue = 6,00,000 covers both discount on issue and premium payable on redemption. Premium on Redemption = 4,00,000. Discount on Issue = 6,00,000 - 4,00,000 = 2,00,000. Discount percent = 2,00,000 / 20,00,000 * 100 = 10%.

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